China's economic indicators for July fell short of expectations. The market is awaiting measures from Beijing

In July, China’s macroeconomic indicators pointed to an economic slowdown across several fronts. Weakening consumer demand, a deepening decline in investment, and rising unemployment are increasing pressure on the government, which is expected to implement additional fiscal and monetary stimulus measures in the second half of the year, according to CNBC.

Several statistics released Monday by China’s National Bureau of Statistics fell short of market expectations, according to CNBC. Moreover, as Bloomberg notes, the release of the statistics was delayed by five hours from the usual schedule due to a ceremony attended by Xi Jinping marking the 100th anniversary of the birth of former Chinese President Jiang Zemin.

Retail sales growth in July was just 0.6% year-over-year, significantly below the 1.5% forecast in a Reuters survey and weaker than June’s 1.0% figure, according to CNBC. The effect of the government’s subsidy program for trading in old goods for new ones has worn off. According to Goldman Sachs estimates, nominal retail sales growth in the first half of the year was just 1.3%, compared with 5% for the same period last year. As Bloomberg notes, the automotive sector—which accounts for about 8% of all retail sales—dealt a serious blow to the retail sector: passenger car purchases in July plummeted by 21% year-over-year.

Industrial production output rose 4.5% year-over-year (compared with a forecast of 4.8%), slowing from 5.3% the previous month. As Bloomberg points out, the new orders index in the Purchasing Managers’ Index (PMI) began to decline again, falling to a three-year low.

During the first seven months of the year (January through July), fixed capital investment fell by 6.7% year-over-year. The rate of decline accelerated compared to the first six months, when the decline stood at 5.7%. In the real estate sector, according to Bloomberg, investment fell by 19.2%, hitting a new all-time low. Investment in infrastructure and manufacturing also declined by 3.6% and 1.7%, respectively. High-tech industries (information services, aerospace, and mechanical engineering) remain the sole driver of growth, with investment in these sectors increasing by 5% year-over-year.

Consumer price inflation (CPI) fell to a six-month low of 0.5% in July, but the core index—which excludes volatile food and energy prices—stood at 0.9%.

Weak domestic demand also took its toll on the credit sector. According to Barclays, the volume of new bank loans in July posted the largest monthly decline on record. Lending to households (including mortgages) declined after a brief recovery in June, reflecting stagnation in the real estate market and public uncertainty about the stability of their incomes.

The official unemployment rate in urban areas rose to 5.2%, up from 5.0% in June. Youth unemployment is a particular cause for concern: 14.9%, according to official data for June.

An official statement from China’s National Bureau of Statistics notes the need to “accelerate the transition to new drivers of growth.” Fu Linhuiye, a spokesperson for the bureau, attributed the July slowdown to geopolitical pressures and abnormal heat waves within the country, but expressed confidence that the annual GDP growth targets would be met, according to CNBC.

Financial sector analysts are expecting more decisive action from the authorities, as they doubt that current measures are sufficient. Jacqueline Zhong, chief China economist at BNP Paribas, believes that China’s GDP growth slowed to about 4.1% at the start of the third quarter—which is not enough to meet the target set by Beijing, according to Bloomberg. Zhang Zhivei, chief economist at Pinpoint Asset Management, points to mounting risks and forecasts a possible interest rate cut by the People’s Bank of China.

For her part, Yue Shanya, a senior economist at Oxford Economics, notes that implementing the fiscal stimulus measures adopted at the recent Politburo meeting will take time. Given the weak baseline in July, the expert expects only a moderate economic recovery in the second half of the year, maintaining the annual GDP growth forecast for China at 4.8%. Lynn Sun, chief economist at ING Bank, adds that the continued deterioration in economic indicators significantly increases the likelihood of additional support measures being adopted in the coming weeks. Bloomberg cites the allocation of new quotas for special sovereign bonds and the expansion of targeted project financing programs as possible options.

This article was AI-translated and verified by a human editor